Hertz Car Rentals is selling off a huge number of battery-powered Electronic Vehicles, citing low demand for them and Ford is slashing production of the F-150 Lightning pickup truck. General Motors cut its near-term investment in EVs and is now bringing back plug-in hybrids, which are powered by both batteries and gasoline.
Even Tesla, the all-electric juggernaut that has shaped the rise of EVs in the U.S., warned investors that it has a quieter year ahead.
Is it the end of the road for the much-touted EV transition?
Probably not when you take a closer look at the overall car market.
After a record year in 2023, EV sales are expected to set another record in 2024. The CEO of Hertz says the company “may have been ahead of ourselves” in how quickly it moved toward EVs — but maintains it’s the right long-term plan. Ford and GM are shifting their timelines, not their targets. And Tesla, of course, remains all in on EVs.
A slowdown in sales growth doesn’t signal that EVs aren’t coming. To the extent that it’s prompting a reckoning, it’s over the pace of the journey, not the destination.
“We’re just going from, we like to say, rosy to reality,” says Stephanie Valdez-Streaty, with Cox Automotive.
It might seem odd for sales to level off now, when there are more EV options than ever.
“Our data shows consumer interest, EV availability and EV affordability are all hitting the highest levels that we’ve seen,” says Elizabeth Krear, of J.D. Power. “Nearly one-third of all consumers now say they are ‘very likely’ to consider an EV for their next vehicle purchas
So why do sales appear to have run out of steam, at least temporarily?
Analysts say it’s the nature of the adoption curve: Any new technology catches on first with a tiny slice of tech geeks, the “innovators.”
Then it reaches the “early adopters” — people who like to buy gadgets and aren’t afraid of trying something new. Early adopters will put up with some inconveniences — like, say, finding public chargers for a new kind of car — and they’ll pay a little extra for cool tech.
Consider Sameer Joshi, a car shopper at the Detroit Auto Show last fall, just as EV sales were leveling off.
“EVs, right now, I look at them but I’m not going to buy them,” he said. “Just because of the hassles with charging. And the second thing is cost. You know, they’re too expensive. When I get something around $25,000 — yeah, I will consider buying them.”
He’s the epitome of the mainstream shopper.
Pat Ryan, CEO of the car shopping app CoPilot, says people like Joshi will come around eventually.
“Inevitably, what ends up happening is, over time, people start to get more comfortable,” he says. He points to hybrids, the whiz-bang new technology in the auto world back when the Toyota Prius made waves.
In fact, Toyota just forecast record profits for 2024, driven by its popular hybrids.
Of course, that took more than two decades. How long will it take EVs to truly go mainstream?
“It depends how much money you’re willing to lose,” Ryan laughs.
And this is another big wrinkle to the EV slowdown story. Lower prices would motivate demand, but they’d be very painful for carmakers.
The average EV used to sell for more than $66,000, but is now down to $50,798, according to Kelley Blue Book. That’s just about two grand more than the average for all vehicles, including gas-powered ones, of $48,759. That’s a far narrower gap than a few years ago.
But most EVs sold — 78%, according to JD Power — are still in the premium segment. Truly affordable EVs are few and far between.
Tesla CEO Elon Musk talks about this a lot. “There are lots of people who want to buy our cars. They just can’t afford it,” he told investors last month, reiterating a common theme. The reason Tesla is “between two major growth waves,” he says, is that they need to design their cheaper next-generation vehicle platform before launching another big expansion.
In the meantime, Tesla has cut prices aggressively on its existing vehicles, driving the industry’s price drops.
That’s been welcome news to car shoppers. It’s put a pinch on Tesla’s profits. And it’s put other automakers — the ones racing to catch up with Tesla — in an uncomfortable spot.
Batteries are expensive, and legacy automakers are still figuring out how to make EVs. That means they’re more expensive to make than gas-powered cars — and therefore, less profitable.
Consider Volkswagen, a mass-market global automaker that’s trying to scale up EVs — but also protect its profits.
In a recent interview with NPR, the CFO of Volkswagen Group, Arno Antlitz, emphasized “flexibility” and “compromise” when he talked about the company’s plan to build EVs. And he summed up Volkswagen’s strategy as “value over volume” as a way of explaining why VW is not slashing prices to catch up to Tesla.
EVs are crucial to Volkswagen’s future, especially in the U.S., where the company wants to expand its market share. But for now — and for at least the next two years — VW’s splashy EVs, from the ID.4 to the Buzz, make less money than its other vehicles. That’s a big reason why Volkswagen doesn’t want to cut EV prices more, even though it would accelerate sales.
You can see this tension play out at other automakers, many of whom don’t just make less money on EVs — they aren’t making any money at all, yet.
Ford, too, is losing money on its current EVs, which helps explain what’s happening to the Lightning.
The cheapest version, the Pro, sells for $50,000. That’s way less than it used to. But it’s $10,000 more than Ford’s promised pricing, and $15,000 more than the cheapest gas-powered F-150. (For the record, most buyers don’t get the cheapest version; they want bells and whistles on their pickups.)
Ford says customers love the Lightning. But instead of cutting prices to sell more of them, Ford is cutting workers’ shifts to produce less of them. It says this is to “balance” growth and profitability while, like Tesla, it works on a cheaper — and it hopes profitable — next-generation vehicle platform.
Ford, GM and VW are all adamant that their medium- and long-term commitments to EVs haven’t budged.
“Although the rate of growth has slowed recently, EV demand is clearly moving in the right direction,” a GM spokeswoman told NPR. Ford CEO Jim Farley told investors on Tuesday that “the journey on EVs is inevitable, in our eyes.”
“Don’t get us wrong, we are absolutely committed to ramp up electrification. That’s clear,” VW’s Antlitz says. “But it might be not as fast as everybody expected.”
Some companies aren’t slowing down. Volvo says it doesn’t see demand softening in its sales at all. A few years ago, the company vowed to phase out gas powered cars entirely by 2030.
“I still feel very good about that target,” says Volvo USA’s president and CEO Michael Cottone. “I mean, we’re committed to being fully electric by 2030.”
Granted, Volvo is on the luxury end of the market, where profit margins are fatter — but they’re also planning on launching a $35,000 compact electric SUV this year. If that price sticks, it will undercut the competition significantly.
And Cottone says when it comes to EV margins, he’s “very happy with where we are.”
Most automakers aren’t there yet. The clock is ticking.
Pulling that off will require more EV chargers — and better chargers. It will require a lot of people becoming comfortable with a new technology. And it will require prices to come down.
“The demand and supply will meet somewhere,” says Irina Im, a manufacturing analyst at RSM. “But the next few years, I think, will be challeng[ing] for automakers to try to meet the consumer.”